8. Make Sure You’re Ready: Essential Steps Before Investing in the Stock Market

Before jumping into the stock market, it’s important to ensure your financial foundation is strong. A well-prepared approach to investing starts with solid day-to-day cash flow and overall financial stability. Here’s our recommended checklist to help you get ready:

• Save for emergencies: Having an emergency fund with three to six months’ worth of essential expenses is crucial for financial security. This reserve helps cover unexpected costs and minimizes the risk of needing to cash out investments during market downturns.

• Get out of debt: Eliminating debt, especially high-interest debt like credit cards, is a powerful step toward financial freedom. Paying off debt with a 14% APR, for example, is like earning a guaranteed 14% return. We recommend clearing high-interest debts first, with the possible exception of a manageable mortgage (no more than 25% of your gross monthly income, including taxes and insurance).

Before investing, ensure your finances are in good shape. By tackling these steps first, you’ll be ready to let your money grow without unnecessary financial setbacks.